April 16, 2004
In this issue:
- Senate Finance Chairman Introduces Drug Reimportation Bill
- Congress Continues to Weigh in on Hard 4 p.m. Close Proposal
- FASB Schedules Public Discussions on Stock Option Expensing Proposal
Senate Finance Chairman Introduces Drug Reimportation Bill
On April 8, Senate Finance Committee Chairman Charles Grassley (R-IA) introduced the Reliable Entry for Medicines at Everyday Discounts through Importation with Effective Safeguards (REMEDIES) Act (S. 2307). The bill would immediately legalize the importation of prescription drugs from Canada from certified foreign exporters who register with the Food and Drug Administration (FDA) and pay a user fee to cover the costs of inspections and oversight. In the second year of the program, the Department of Health and Human Services (HHS) would be required to submit a report to Congress on the safety of the program and its impact on trade. If Congress does not act, the program would automatically be expanded in the third year to include prescription drug imports from Europe, Japan, Australia and New Zealand.
In his floor statement, Grassley said he intends to use the tax code as a "carrot and stick" to ensure drug manufacturers do not take steps to prevent importation of their products. The "carrot" is a 20 percent increase in the research and development tax credit for pharmaceutical manufacturers who certify that no actions have been taken, directly or indirectly, to prevent the authorized importation of a qualifying drug into the U.S. The "stick" is that pharmaceutical manufacturers who decline to certify that they are allowing imports will lose the business expense tax deduction for advertising expenses for that year.
Since the bill contains tax provisions it has been referred to the Senate Finance Committee, though the Senate Health, Education, Labor and Pensions (HELP) Committee is expected to take the lead on the issue and Senate Democrats are working on their own bill.
The reimportation issue held up the confirmation of former FDA Commissioner Mark McClellan as administrator of the Centers for Medicare and Medicaid Services (CMS). As a result, the Bush Administration established a task force on drug importation. The new bill introduced by Grassley, and other measures that may follow, increase the possibility that Congress may also act later this year to establish importation standards for prescription drugs. For more information, contact Maria Ghazal, Council director, health policy, at (202) 289-6700.
Congress Continues to Weigh in on Hard 4 p.m. Close Proposal
A number of Senators from western U.S. states (In the Mountain and Pacific Time Zones) sent a letter to Securities and Exchange Commission (SEC) Chairman William Donaldson on April 8 opposing the SEC's proposed hard 4 p.m. close rule. This letter follows the example of Representatives Rob Portman (R-OH) and Ben Cardin (D-MD), Representatives Michael Oxley (R-OH) and Richard Baker (R-LA) and Senators Charles Grassley (R-IA) and Max Baucus (D-MT) who have recently sent similar letters. As the Council argued in its February 5 comment letter, such a rule would adversely affect retirement plan investors by forcing earlier calculations of fund prices. Participants in West Coast states would be particularly affected by the rule because of the three-hour time difference.
As in previous letters, the Senators' letter recommends the consideration of other alternatives to prevent late trading abuses that limit the investment decisions of mutual fund shareholders. The Council and several individual member companies were instrumental in encouraging these communications to the SEC. For more information, contact Jan Jacobson, Council director, retirement policy, at 202-289-6700.
FASB Schedules Public Discussions on Stock Option Expensing Proposal
The Financial Accounting Standards Board (FASB) has scheduled public roundtable discussions regarding its March 31, 2004 Exposure Draft, "Share-Based Payment." The sessions will take place on June 24 in Palo Alto, CA, and June 29 in Norwalk, CT. FASB's "Share-Based Payment" proposal would require companies to expense stock options awarded to employees, and would also require companies to expense the discount (which can be up to 15 percent) for employee stock purchases under Employee Stock Purchase Plans (ESPPs). The deadline for written comments on the proposal is June 30, 2004, and the proposal's planned effective date is January 1, 2005.
The purpose of the roundtable meetings is to listen to the views of, and obtain information from, interested constituents about the proposal. Any individual or organization desiring to participate must notify the FASB by sending an email to email@example.com by May 17. The email notification should specify the location of the roundtable meeting in which the individual or organization desires to participate. A broad cross-section of participants (investors, preparers of financial statements, auditors, valuation experts, and others) are expected to participate in the discussions.
For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.